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Joint Liability Lending in Microcredit Markets with Adverse Selection: a Survey

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Author Info
Alessandro Fedele

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Abstract

This paper reviews recent literature on joint liability lending in microcredit markets characterized by adverse selection. This mode of lending consists of granting individual loans to wealthless borrowers provided that they form groups: if a group does not fully repay its obligations, then the microlender cut off all members from future credit until the debt is repaid. Joint liability lending is able to extract information through a peer selection mechanism, with the effect of raising both repayment rates and welfare with respect to individual lending.

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File URL: http://www.statistica.unimib.it/utenti/WorkingPapers/WorkingPapers/20060901.pdf
File Format: application/pdf
File Function: First version, June 2006
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Publisher Info
Paper provided by Università degli Studi di Milano-Bicocca, Dipartimento di Statistica in its series Working Papers with number 20060901.

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Length: 12 pages
Date of creation: Sep 2006
Date of revision: Sep 2006
Handle: RePEc:mis:wpaper:20060901

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Related research
Keywords: microcredit; underdeveloped economies; joint liability lending.;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment

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  1. F. Calidoni-Lundberg & A. Fedele, 2006. "Technology replaces culture in microcredit markets: the case of Italian MAGs," Economics Department Working Papers 2006-EP11, Department of Economics, Parma University (Italy). [Downloadable!]
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This page was last updated on 2009-11-17.

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